NASDAQ 100 FORECAST:
- Nasdaq 100 rallies despite rebound in Treasury yields as positive market mood boosts appetite for riskier assets
- Sentiment improves following news that bank giants, including JPMorgan and Citigroup, have joined forces to rescue regional lender First Republic
- This article looks at key Nasdaq 100 technical levels to watch in the near term
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The Nasdaq 100 surged on Thursday as market sentiment took a turn for the better after Credit Suisse tapped a lifeline from Swiss regulators and big U.S. financial firms joined forces to rescue First Republic Bank, a regional depository institution on the brink of failure following the collapse of SVB and SBNY.
In late afternoon operations, the Nasdaq 100 was on track for a daily gain of nearly 3%, trading at its highest level in a month (12,720), with Amazon, Alphabet and Nvidia rallying more than 4% despite the sharp rebound in Treasury yields, which saw the 2-year note rise more than 20 bps to 4.13% in a volatile session.
Investors cheered news that JPMorgan, Citigroup, Bank of America, Wells Fargo, Morgan Stanley and PNC have allegedly teamed up to deposit some $30 billion with First Republic Bank, in a U.S. government-led effort to shore up troubled lending institutions amid growing systemic risks.
Today’s developments, along with the Federal Reserve’s emergency measures put in place on Sunday to offer loans to regional lenders facing liquidity constraints, may temporarily ease Wall Street’s concerns about a banking sector meltdown, but the underlying malady is still unresolved and may flare up again soon.
2023 FED FUTURES IMPLIED YIELDS & TREASURY RATES
Looking ahead, the equity market remains in a precarious position. Sentiment may seem to be on the mend following a couple of bullish days on Wall Street, but the broader outlook continues to be challenging in the face of sticky inflation and increasingly restrictive monetary policy.
After recent events, traders have repriced lower the Fed’s tightening path as seen in the chart below, but policymakers could push back against extremely dovish expectations if banking-system-related stress abates further in the coming days. We’ll know more next week when the FOMC announcement its March decision, but this is a key risk to keep in mind.
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NASDAQ 100 TECHNICAL ANALYSIS
In terms of technical analysis, after breaking above trendline resistance, the Nasdaq 100 managed to hit its best level in four weeks, pointing to unleashed animal spirits. With momentum on its side, the tech index could soon recapture its 2023 highs around 12,900, an area of critical resistance created by the 38.2% Fib retracement of the November 2021/October 2022 sell-off. On further strength, the focus shifts to 13,745. In case of a bearish reversal, initial support rests at 12,350. Below that, the next floor to keep in mind corresponds to the 200-day simple moving average.